The Nearly Cult of the Lean Start-Up

At times Eric Ries’s presentation strayed dangerously close to the messianic, but every time the author of The Lean Start Up headed too far in that direction, he pricked his own bubble.

“I have had some terrible failures,” he told the packed audience of aspirant, and actual, entrepreneurs in central London. “Follow me and you too can have terrible failures.” It is a good line and gets a big laugh.

His self-effacement plays well among the nearly 600 people who turned out on a cold Monday night to hear this young start-up “guru” speak.

His lecture was peppered with highly tweetable quotes: “If our competitor can learn faster than us, then they deserve to win, and we deserve to die”; “The question is not whether something can be built, but should it be built”; “If we’re really honest, most startups represent a colossal waste of time and energy”; “Only failure promotes learning.”

Whether you agree or not with all of that, it does make for easily digestible fare. Nor is Mr. Reis apologetic for making things simple. “If you can’t spread your message…”

Putting on the “black turtleneck”

Aware of the “cult” swipes, in private Mr. Ries is dismissive of what he calls “success theater” or “putting on the “black turtleneck” and is keen to distance himself from the “great man theory of management”. He visibly flinches at the word guru. “I always think of Peter Drucker who said people used guru because charlatan is too long to fit into a headline.”

His theory of entrepreneurial management—and he is Entrepreneur in Residence at Harvard Business School—as espoused in his book published late last year in the U.S., is that entrepreneurs need a new way of measuring value. “I call it innovation accounting—not innovative accounting, that can end you up in jail.”

“I believe that the definition of entrepreneurship is the management discipline that deals with high uncertainty situations, that therefore the unit of progress, the way we measure our success as entrepreneurs, is learning that which is valuable to know.

“I call this validated learning. We should develop practices that optimize that learning, and because there already a management system that is based on learning how to eliminate waste and promote things that are valuable called “lean”, it could not be more obvious that we should take the best such ideas and apply them to this new context with a new definition of value.”

It has to be quantifiable or this is all a waste of time

This idea of value is what Mr. Ries means when he talks about accounting. “It has to be quantifiable or this is all a waste of time,” he says. We can draw a lot of valuable lessons from science. The proof in science is that you have learned how to do experiments that show the right results. The same thing is true for validated learning. If we have learned something interesting, then prove it by building products that are in line with that learning.”

This is the development cycle Mr. Ries calls “build-measure-learn”. Build your product, see how people use it, what do they like, what do they click on, what do they hate, and use that to inform your next decisions.

But in order to know how successful or otherwise you are, you need a system of evaluating value.

“That is accounting. We have all been indoctrinated with thinking that accounting is about tracking money, but money just doesn’t work very well when the numbers are so small, like in an early stage start up. There is no RoI, there is no profitability. Everything is close enough to zero that the accountants don’t care.

If 10 people in a row hate my product, isn’t that telling me something?

“The units of innovation accounting are not the gross numbers. Rather than focus on how much money we make, we might look at what is the percentage of customers who pay. We have to look at other things.

“The nice thing about those metrics is that they are not market-size dependent. If you have 100 customers you can already say what percentage are paying. If it is zero then I can already start to be a bit worried about the model.

“If 10 people in a row hate my product is that statistically significant? It is is not conclusive evidence, but it is certainly telling you something.”

Judging from the size of his audience at the Business Leaders Network event on Monday, the buzz afterwards, and the fact that Mr. Ries has had almost 20 meetings in his brief time in the U.K. and Ireland (including a meeting at 10 Downing Street), he is preaching to a receptive audience.

Comments (4 of 4)

P.S. And it was quite fun being a bit of a cult for the evening. I hope no one took us too seriously.

10:53 pm January 18, 2012

Mark Littlewood, The BLN wrote:

Ben,

Thanks for coming and a really nice write up. Captures the essence of the idea really nicely. The reason we wanted to run this event with Eric is that he has managed to encapsulate some very important principles for business in a way that is beautifully memorable and easily spread - a real entrepreneurs idea virus.

This has also meant there was extraordinary interest in the man himself. Watching him in action over the course of a few days it was extraordinary how many people came up to him to ask about complicated problems that they had that they wanted help to solve. Even more extraordinary was the number of people who realised that they knew the answer to the question they were asking even as they said it. As he said himself, if the one role he plays in helping to build a stronger ecosystem is to be, 'that man on the internet' that gives someone permission to do what they know they have to do, then he is happy.

I think that kind of empowerment for entrepreneurs is a powerful thing.

Thanks. M

8:31 pm January 18, 2012

Josh Ledgard wrote:

It's amazing how many people don't bother to do that kind of investigation when deciding what to build into their products. It drove me mad and was one of the main reasons I left to start http://www.kickofflabs.com on my own... also to help out fellow lean cult members.

7:54 pm January 18, 2012

Geek wrote:

That value accounting is just some simple economics and stats dude. Go figure

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